There it is! A simple financial plan that will never let you down. All each of us has to do is work out on a regular basis how to allocate our money between these three priorities. By doing this we learn to make choices, those sometimes uncomfortable trade-offs between ‘this’ and ‘that’, between ‘now’ and ‘tomorrow’, between the ‘right’ thing and the ‘fun’ thing. Gradually we learn to view our financial lives as a continuum not, as so many of us do, from pay day to pay day.

When do we start?

Right at the beginning of course when we are children. Here is a life-changing observation:

You can’t always get what you want.

For the Stones fans out there, the rest of the line is true too.

In his brilliant new book ‘The Opposite of Spoiled’ Ron Lieber writes:

“We parents are in the adult making business after all, and we should do everything possible to build grown up humans with 15 or 20 years of experience handling money.”

The book deserves to be read by parents who want to learn how to bring up our children to make a better job of handling money, perhaps better than we have ourselves. This is not so much about the nuts and bolts of bank accounts and savings plans, it is more about how to teach our children the art of making conscious choices while living within their means.

I particularly like one of Ron Lieber’s suggestions about allowances. After agreeing an allowance with your child, divide the money equally into three jars. It is important for your child to be able to see the money, so not a piggy bank. Then label each jar SPEND SAVE GIVE and perhaps have some fun decorating each jar.
Effectively this is a first budget because there is money for spending soon, some for people who may need it more than we do and some to keep for when we may need or want something later. As the child gets older they can begin to allocate the money themselves in whatever proportion makes sense to them. It is important that they learn so they should be allowed to spend the money on anything they want.

This system will create a simple structure around which you can have many thoughtful conversations with your child. You will be handing them control over their own money and enabling them to make their own decisions about what they want. And you will be teaching them time-honoured lessons about budgeting and self-control.

As an adult would this training as a child have helped you make a better job of handling your finances?
Me too.